BONN -- The newly elected German government finally took shape with the unveiling of a cabinet and a center-left policy program that is causing discomfort in the business community.

Chancellor-elect Gerhard Schroeder, who portrayed himself as a business-friendly candidate, only added to the sense of unease Tuesday by calling for greater regulation of international capital markets. Speaking at a news conference to announce the completion of the coalition talks, Mr. Schroeder said he would use his position next year as chair of the Group of Seven industrialized countries to press the subject.

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"International agreements are urgently needed to limit financial speculation so that the global economic crisis does not spread to Europe and Germany," Mr. Schroeder said. He added that he will call upon his designated finance minister, Oskar Lafontaine, to draft proposals for improving the regulation of international markets and the supervision of banks.

Mr. Schroeder's statements only served to deepen the gloom in Germany's business community, still stunned by the refusal on Monday of a high-profile computer entrepreneur to accept the position of economics minister. While few business leaders expected the ruling coalition of Mr. Schroeder's Social Democratic Party and its junior partner, the environmentalist Green Party, to be in favor of free markets, they were encouraged by Mr. Schroeder's pro-business rhetoric during the campaign.

Sense of Dismay

But they have watched the coalition talks over the last two weeks with a sense of dismay as the SPD and the Greens cobbled together a policy platform that gives business little reason for joy. Formally unveiled on Tuesday, the platform proposes the introduction of new taxes on energy, the gradual shuttering of nuclear power plants and the rollback of labor market reforms introduced by the last government. The much promised reduction of Germany's top tax rate will take place only gradually through the year 2001 and even then will only be cut from its current 53% level to 48.5%.

For German companies, who are also being called on by the government to create more jobs, the policy plans are disquieting. "The risks to the further development of the economy and the competitiveness of companies are enormous," the Federation of German Industry said in a statement on Tuesday.

In fact, the timing struck the German business community as particularly poor as it comes at a moment of global economic uncertainty. Citing the crisis hitting Asia, Latin America and Russia, Germany's six main economic institutes on Tuesday jointly cut their growth forecasts for the country's economy, saying gross domestic product will expand by just 2.3% next year rather than the 2.7% previously predicted. Yet the institutes said they didn't take into account the new government's policies in making their predictions.

Economists said the new government's program poses a threat to corporate investment because it comes at a delicate moment in the global economy. "This hits the German business community at a time when it's already nervous about external circumstances,'' said Thomas Mayer, a Frankfurt-based economist with Goldman Sachs International. Mr. Mayer said he has already slashed his 1999 growth GDP forecast to just 1.7% in part because of the political climate.

Feeling of Deja Vu

Some people in the business community are even starting to ask openly whether the new German government is headed for the same problems that confronted former French President Francois Mitterrand when he took power in 1981. Mr. Mitterrand introduced a sweeping set of socialist policies, such as nationalizing the nation's banks and boosting demand. The result was an economic disaster -- high inflation and pressure on the French franc -- that forced Mr. Mitterrand to reverse his course in 1983.

"We are all hoping the new government would not go through this sort of phase," said Stefan Bergheim, a Frankfurt-based economist with Merrill Lynch.

The SPD and the Greens now have less than a week before formally taking office. Both parties will hold separate conferences this weekend to seek formal approval from their members for the policy platform. Then, next Tuesday, exactly one month after the Sept. 27 elections, Mr. Schroeder will be sworn in as Germany's new chancellor.

The 14 cabinet members who will join Mr. Schroeder in the new government conform to expectations. Green party leader Joschka Fischer will be foreign minister. SPD party leader Mr. Lafontaine, who has called for imposing trading bands on major currencies, will be finance minister. And union leader Walter be labor minister.

Economics Ministry Surprise

The big surprise in the cabinet came on Monday when Jost Stollmann, a computer entrepreneur and political independent, suddenly refused to accept the post as economics minister. Mr. Stollmann had been put forward during the campaign by Mr. Schroeder as the ideal man for the job because of his independence and his understanding of the needs of small business.

For many, Mr. Stollmann's departure was the definitive sign that the free-market campaign rhetoric was giving way to old-fashioned leftist politics championed by Mr. Lafontaine, who is widely seen as the real power behind the SPD machinery. But party officials scrambled Tuesday to give a different picture. "It was something of a shock," SPD party manager Franz Muentefering acknowledged on German radio. "But we shall not be distracted from our pro-business, center-ground line. That's a political conviction not dependent on one person."

The economics ministry now goes to 52-year-old Werner Mueller, a former executive at utility giant
Veba AG
.

The apparent turnaround from campaign rhetoric to government policy is hard to swallow for many in German business circles. As premier of the German state of Lower Saxony, Mr. Schroeder campaigned as a business-friendly candidate, making frequent references to the fact that he serves on the supervisory board for
Volkswagen AG
. He held that post by virtue of the Lower Saxony government's shareholding in the giant auto maker.